943 F.

2d 1219
16 UCC Rep.Serv.2d 1004

NORTHWEST CENTRAL PIPELINE CORPORATION,

renamed Williams
Natural Gas Company, Plaintiff-Appellant,
v.
JER PARTNERSHIP; Ellis Petroleum Corporation, Inc.;
Yuma
County Oil Corporation, Inc.; Prima Energy Corporation;
Alpar Resources, Inc.; Talus Properties Ltd.; John P.
Lockridge, Defendants-Appellees.
NORTHWEST CENTRAL PIPELINE CORPORATION,
renamed Williams
Natural Gas Company, Plaintiff-Appellee,
v.
JER PARTNERSHIP; Yuma County Oil Corporation, Inc.,
Defendants-Appellants,
and
Ellis Petroleum Corporation, Defendant.
Nos. 90-1067, 90-1090.

United States Court of Appeals,

Tenth Circuit.
Aug. 30, 1991.

John T. Schmidt of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C.,
Tulsa, Okl. (C. Kevin Morrison and Wade R. Wright of Hall, Estill,
Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Okl., Michael S.
McCarthy and Catherine A. Lemon of Faegre & Benson, Denver, Colo.,
and Lewis A. Posekany, Gen. Counsel of Williams Natural Gas Co.,
Tulsa, Okla., with him on the briefs), for plaintiff-appellant.
Theodore M. Smith, Denver, Colo. (Barry W. Spector, Denver, Colo.,
with him on the briefs), for defendants-appellees/cross-appellants, Yuma

County Oil Co. and JER Partnership.

Gary C. Davenport of McGloin, Davenport, Severson and Snow, Denver,
Colo. (Eric A. Beltzer of McGloin, Davenport, Severson and Snow,
Denver, Colo., William F. Demarest, Jr. of Holland & Hart, Washington,
D.C., with him on the briefs), for defendants-appellees, Prima Energy
Corp., Alpar Resources, Inc., Talus Properties Ltd. Partnership, and John
P. Lockridge.
Before ANDERSON and McWILLIAMS, Circuit Judges, and ALLEY,*
District Judge.
STEPHEN H. ANDERSON, Circuit Judge.

Williams Natural Gas Company ("Williams") appeals a district court order

granting judgment to defendant/appellees. We affirm.

BACKGROUND
2

This dispute involves the interpretation of three long-term natural gas purchase
contracts. Williams operates an interstate natural gas pipeline. In 1982,
Williams1 entered into a series of contracts to purchase natural gas from
producers in Yuma County, Colorado. The three contracts in dispute here are
with Yuma County Oil Company ("Yuma"), JER Partnership ("JER"), and a
collection of entities referred to as "the Lockridge Group" (Alpar Resources,
Inc., Talus Properties Limited Partnership, and John P. Lockridge). Each of the
contracts is a "take-or-pay" agreement for a term of twenty years.

When the contracts were executed, the gas involved was price regulated under
the Natural Gas Policy Act of 1978 ("NGPA"), 15 U.S.C. 3301, et seq.
Almost all of the wells covered by the contracts produce gas from the Niobrara
formation, a designated "tight formation" for purposes of special incentive
pricing under 107 of the NGPA, 15 U.S.C. 3317. See 18 C.F.R.
271.703(d)(20).2 On January 1, 1985, the 107 gas involved in the contracts
became deregulated pursuant to 121 of the NGPA. See Northwest Central
Pipeline Corp. v. Mesa Petroleum Co., 643 F.Supp. 280 (D.Colo.1986). 3 On
January 4, 1985, Williams wrote each of the appellees and informed them that,
pursuant to deregulation, Williams was exercising its contract right to "market
out" of the agreements. The appellees disputed the existence of any such right
to withdraw from the contracts, and this litigation ensued.

The contract language at issue is found in Section 3, which provides as

The contract language at issue is found in Section 3, which provides as

follows:4

3. Price
5

For all gas received by Bonny for the account of Buyer under this Contract less
Seller's gas used by Bonny as compressor fuel, Buyer shall pay Seller by check
on or before the 25th day of the next calendar month succeeding each Fiscal
Month in which such gas had been delivered, the applicable one of the
following prices for the gross heating value thereof as determined pursuant to
Section 4(g):

(a) For gas received during the month of January, 1982, the price shall be three
dollars and three tenths cents ($3.003) per million (1,000,000) Btu's.

(b) For gas received during each succeeding month thereafter, the price per
million (1,000,000) Btu's shall be the applicable maximum lawful price
determined in accordance with the Natural Gas Policy Act of 1978, as such
price may be revised from time to time by the Federal Energy Regulatory
Commission.

(c) Notwithstanding anything herein to the contrary, it is agreed that if the

Federal Energy Regulatory Commission as heretofore defined is exercising
pricing jurisdiction over the gas purchased and sold hereunder, the price to be
paid for such gas shall be equal to the applicable maximum lawful rate
approved by such authority. If such authority shall at any time or from time to
time authorize, prescribe, approve or permit a maximum lawful price or prices,
however determined, applicable to the gas being sold and delivered hereunder,
which is higher than the price otherwise applicable hereunder, then the price
for gas sold hereunder shall be increased to equal such higher maximum lawful
price effective as of the date such authority allows the same to become
effective. Whenever the provisions of Paragraph (c) or (d) of this Section
effectuate an increase in price, such increased price including any adjustments,
reimbursements and/or escalations shall thereupon be substituted for and
become the applicable Contract price hereunder.

(d) In the event the regulation of the price at which natural gas is sold ceases in
whole or in part, or is modified, so as to allow for the sale of gas hereunder at
redetermined prices, then Seller shall have the right to request a redetermination
of the price at which natural gas is to be sold hereunder. Any such request shall
be made in writing and shall in the first instance be made during the six (6)
month period immediately following the effective date of such deregulation and

subsequently at any time during the six (6) month period preceding each yearly
anniversary of the effective date of such deregulation. The redetermined price,
including tax reimbursement, to be paid during each such period shall be the
arithmetic average of the two (2) highest prices then being paid by two
different gas transmission companies pursuant to contracts for gas of
substantially the same quality and quantity, and produced within the Denver
Julesburg Basin, plus the escalations and reimbursements provided for therein.
The redetermined price will become effective in the first instance on the
effective date of deregulation and subsequently on each yearly anniversary date
of such deregulation, but in no event shall the redetermined price result in a
price which is less than five dollars and fourteen and four-tenths cents ($5.144)
effective January 1, 1982, with an escalation of ten percent (10%) per year
thereafter. If at any time Buyer determines in its sole judgment that it is
uneconomical to continue to purchase Seller's gas at the price established in this
Paragraph (d), then, Buyer may terminate this Contract upon thirty (30) days
written notice to Seller; provided, however, within said thirty (30) day period,
Seller may reduce the redetermined price to the highest price Buyer may find to
be compatible with the economic operation of Buyer's pipeline, in which event
this Contract shall not be terminated under this Paragraph (d).
10

(e) If the Federal Energy Regulatory Commission or any other authority shall at
any time authorize, prescribe, approve or permit a price for High-Cost Natural
Gas (as described in Section 107 of the Natural Gas Policy Act of 1978)
including, without limitation, High-Cost gas from Tight Formations, applicable
to the gas sold hereunder, which price is in excess of the price as determined in
Paragraphs (a), (b), (c) or (d) hereof then Seller shall receive a price not less
than the highest price in Paragraphs (a), (b), (c) or (d) or the applicable
maximum lawful price prescribed, approved or permitted by the Federal
Energy Regulatory Commission pursuant to their incentive pricing authority
granted in Section 107 Paragraph (b) of the Natural Gas Policy Act of 1978.

11

(f) In addition to the other pricing provisions of this Section 3, Buyer agrees to
compensate Seller for production-related costs which the FERC determines
may be paid pursuant to section 110(a)(2) and/or Section 122(e) of the Natural
Gas Policy Act of 1978. If, at any time, the FERC will not permit Buyer to
include any production-related costs incurred by Buyer hereunder in Buyer's
then effective gas tariff, Seller agrees to promptly pay to Buyer upon receipt of
notice thereof or Buyer may, without further notice, deduct from the monthly
gas purchase proceeds paid to Seller pursuant to this Contract the amount of
money which Buyer is not allowed to include in its rates for such productionrelated costs. The term "production-related costs" as used herein shall mean any
cost or expense incurred by Buyer relating to any compressing, gathering,

treating, dehydrating, conditioning or liquefaction of natural gas subject to this

Contract or any other production-related cost as so defined or designated by the
FERC that is incurred by Buyer pursuant to this Contract.
12

R. Vol. I, Tab 21 at Exhibit G ("GAS PURCHASE CONTRACT" Dated

February 26, 1982 between JOHN LOCKRIDGE ET AL "Seller" and CITIES
SERVICE GAS COMPANY "Buyer" and BONNY GATHERING SYSTEM
"Gatherer") (emphasis added).

13

Williams originally filed suit in Colorado state court on February 8, 1985. On

March 4, 1985, the case was removed to the United States District Court for the
District of Colorado. On April 24, 1988, the Honorable John L. Kane ruled on
the parties' cross-motions for summary judgment. Interpreting Section 3(d), he
held that a precondition for Williams's right to "market out" of the contracts
was a seller request for price redetermination. Since it was undisputed that no
such request had occurred, he ruled against Williams, as a matter of law, on its
claimed right to market out of the contracts. Judge Kane also held that the
contracts were ambiguous as to the applicable price upon deregulation, and that
the intent of the parties on that issue would have to be determined at trial. R.
Vol. I at Tab 13.

14

The case was reassigned to the Honorable Richard P. Matsch on April 26,
1988. He ruled on renewed motions for summary judgment on May 24, 1989,
and reaffirmed Judge Kane's ruling regarding the unavailability of any market
out right for Williams. He also held, however, that the contract was not
ambiguous as to price, rather, it contained an open price term upon
deregulation, and held that a reasonable price under U.C.C. 2-305,
Colo.Rev.Stat. 4-2-305 (1973), would be determined at trial. R. Vol. II at Tab
25.

15

The case was again reassigned in December of 1989 to the Honorable Edward
W. Nottingham, who tried the matter on February 5-9, 1990. On the first day of
trial, Judge Nottingham (hereinafter "the district court") returned to Judge
Kane's original position regarding the issue of price upon deregulation and
ruled that parol evidence of the parties' intent could come in on that issue. At
the conclusion of trial, the court entered judgment on behalf of the defendantsappellees.

16

The district court found that during the period in which the contracts were
negotiated and signed, there was a shortage of natural gas and Williams was
aggressively pursuing long-term sources of supply for its pipeline system.

Williams was competing with other potential purchasers in a market

characterized by rising prices. Williams needed the long-term contracts to
supply its customers needs. Moreover, Williams had an additional incentive to
secure sources of gas in Yuma County, Colorado. The Federal Energy
Regulatory Commission ("FERC") had placed a "through-put condition" on
Williams's pipeline servicing that area. If Williams failed to fill the pipeline to
a certain percentage of its capacity, its shareholders would have to absorb fixed
costs that it otherwise could pass on to its customer users. The court found that
the effects of the competitive market and Williams's special needs were
manifest in the contracts' pricing provision, which secured favorable terms for
the seller-producers (appellees). R. Vol. IX at 8-9.
17

The district court upheld the earlier rulings rejecting Williams's claimed right to
market out of the contracts absent a seller request for price redetermination.
The court also held that, absent such a request, the parties intended the last
regulated price to continue as the contract price upon deregulation.

DISCUSSION
I.
18

Williams first contends that the district court erred by partially vacating, as to
deregulated price, the summary judgment order entered by Judge Matsch.
Williams asserts that the order was not "effectively vacated" until after the trial,
"thereby prejudicing Appellant's preparation for, and conduct of, the trial in the
district court." Brief of Appellant at 2.

19

We reject the proffered factual basis for this assertion. Careful scrutiny of the
record reveals Williams had ample notice before the trial began that Judge
Matsch's order no longer governed the proceedings. Judge Matsch himself
apparently revised his ruling on October 13, 1989. In speaking to Williams's
counsel, Judge Matsch said:

20 I--it seems to me what we're walking into then is the whole issue that I
Well,
thought was not going to be necessary, and that is what these parties intended, and
that's what defendants were arguing about the last time out, that we can't just do this
on the basis of the Uniform Commercial Code open price provision. So I guess that's
the kind of trial we're going to have.
******
21
22
[W]hatever
[the parties] intended they didn't write, apparently, because your version
of what they intended is not in the contract. The defendant's version of what they

intended is not in the contract. So I guess if we had an outside law firm involved
we'd have a lawsuit against them, too, but I don't see any way to get around this mess
without just saying, "Okay, the trial's open to the issue of negotiations and the
difference between what the expressed intent was in the negotiations or intents were
in the contract as it was written," which is consistent with the defendants saying that
there never was--well, reformation, I guess, because the language of the contract
doesn't express the mutual intent. I don't know how else we do it but just set it for
trial and let it all hang out, and that's what we'll do.
R. Vol. III at 7-8. 5
23

Thus, it appears that Judge Matsch returned to Judge Kane's position that the
court would consider evidence with regard to the intent of the parties
concerning the appropriate price upon deregulation. At any rate, the district
court clearly informed Williams this was the case at the beginning, not the end,
of trial. In the opening minutes of the first day of the trial, while ruling on
several motions in limine, the court explained:

24
Judge
Matsch in May, of course, construed the contract as being silent on the pricing
provisions and therefore took the view that he would set a price under the Uniform
Commercial Code gap-filler provisions. The defendants argue that Judge Matsch
reconsidered that and it looks like he might have. At any rate, I don't need to decide
that because I've looked at the May 24th order, and I don't agree with Judge Matsch,
and so we're going to conduct the trial in the following manner:
25

It seems to me when there is no provision as to contract price, one of two

inferences can be drawn. The first inference is that the parties did not intend the
matter to be integrated and you can therefore supplement that inference with
custom, usage, trade practice, and so forth. The second inference is that the
parties did intend a complete integration of the contract on this point and
therefore, because there's silence, you have to go to the UCC gap-filler
provisions. It appears to me that Judge Matsch was concluding the second, was
drawing the second inference; namely that there was silence, there was no
ambiguity, and therefore he went to the gap, or he was going to the gap-filler
provisions.

26

I think that's--I don't agree with that. I think that the evidence before the Court
at that time was unclear as to whether there was a complete integration on the
point, and I mean, that evidence can come out at trial here. At any rate, Judge
Matsch may have reconsidered. If he didn't reconsider, I'll now reconsider and
we'll get into that evidence.

27

R. Vol. V at 6-7.

28

This announcement clearly put Williams on notice that Judge Matsch's May
1989 order regarding UCC gap-fillers no longer governed the proceedings.6
Williams did not object or move for a continuance, or even seek
reconsideration. Instead, Williams simply opted to proceed as if the May 24
order were still valid.7 Williams is solely responsible for any prejudice
resulting from this strategy, and cannot now claim that it received insufficient
notice that the May 1989 order was vacated.

29

We cannot agree with Williams's contention that the district court's action
violated any law of the case. See Gage v. General Motors Corp., 796 F.2d 345,
349 (10th Cir.1986) ("The law of the case rule applies only when there has
been a final decision."); Lindsey v. Dayton-Hudson Corp., 592 F.2d 1118, 1121
(10th Cir.) ("Until final decree the court always retains jurisdiction to modify or
rescind a prior interlocutory order."), cert. denied, 444 U.S. 856, 100 S.Ct. 116,
62 L.Ed.2d 75 (1979). Nor do we find that the court abused its discretion in this
regard.

II.
30

Williams next asserts that the district court erred in considering parol evidence
of the parties' intent regarding contract price upon deregulation. In admitting the
parol evidence, the district court found that the contracts were not integrated
agreements and that they were also ambiguous. We consider each of these
independent rationales in turn.

Integration
31

Colorado has adopted section 2-202 of the UCC, which provides:

32
4-2-202.
Final written expression--parol or extrinsic evidence. Terms with respect to
which the confirmatory memoranda of the parties agree or which are otherwise set
forth in a writing intended by the parties as a final expression of their agreement with
respect to such terms as are included therein, may not be contradicted by evidence of
any prior agreement or of a contemporaneous oral agreement but may be explained
or supplemented:
33

(a) By course of dealing or usage of trade (section 4-1-205) or by course of

performance (section 4-2-208); and

34

(b) By evidence of consistent additional terms unless the court finds the writing

34

(b) By evidence of consistent additional terms unless the court finds the writing
to have been intended also as a complete and exclusive statement of the terms
of the agreement.

35

Colo.Rev.Stat. 4-2-202 (1973).

36

The district court found that the contracts were not intended as a complete and
exclusive statement of the terms of the agreement. Consequently, the court
admitted, under subsection (b), extrinsic evidence of a "consistent additional
term," namely, the agreed-upon price for deregulated gas. R. Vol. IX at 19-20,
39.

37

The parties dispute the appropriate standard of review. While integration may
be viewed as a question of law, Universal Drilling Co. v. Camay Drilling Co.,
737 F.2d 869, 871 (10th Cir.1984), it is more commonly characterized as a
question of fact. Firestone Tire & Rubber Co. v. Pearson, 769 F.2d 1471, 1477
(10th Cir.1985); Transamerica Oil Corp. v. Lynes, Inc., 723 F.2d 758, 763
(10th Cir.1983) (citing 2 R. Anderson, Uniform Commercial Code 154-155 (3d
ed. 1982) and 3 A. Corbin, Corbin on Contracts 595 (1960)). In this case, the
integration determination certainly was a predominantly factual inquiry,
revolving around the unwritten intentions of the parties instead of interpretation
of a formal integration clause. Cf. Ray Martin Painting, Inc. v. Ameron Inc.,
638 F.Supp. 768, 773 (D.Kan.1986). We do not disturb a district court's
findings of fact unless they are clearly erroneous. Fed.R.Civ.P. 52(a); Anderson
v. Bessemer City, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518
(1985).

38

Williams asserts that the district court improperly "presumed" that the contracts
were not integrated. See R. Vol. IX at 19-20. We disagree. The district court
specifically reviewed the evidence and held that it did not support a finding of
integration. The court's reference to 2-202's "presumption"8 is nothing more
than a paraphrase of precedent from this circuit: "under section 2-202, there is
no longer an assumption that the parties intended a writing to be the complete
expression of their agreement. In fact, the assumption is to the contrary unless
the court expressly finds that the parties intended the contract to be completely
integrated." Amoco Production Co. v. Western Slope Gas Co., 754 F.2d 303,
308 (10th Cir.1985). Here, the district court expressly found that the parties did
not intend the contract to be completely integrated. After carefully reviewing
the evidence before the district court, we cannot say that its finding was clearly
erroneous.9

Ambiguity

39

Even if we were to find that the contracts were integrated agreements, we

would still affirm the district court's use of extrinsic evidence to determine the
parties' intentions regarding contract price upon deregulation. The district court
alternatively held that the pricing provision in the contracts is ambiguous as to
price upon deregulation. "Parol evidence is inadmissible to vary or contradict
the terms of an unambiguous agreement, but where uncertainty exists such
evidence may be received to explain the contract." Montoya v. Cherry Creek
Dodge, Inc., 708 P.2d 491, 492 (Colo.Ct.App.1985) (emphasis added); see also
Amoco Prod. Co. v. Western Slope Gas Co., 754 F.2d at 308 ("Only if in light
of the circumstances and purposes of the contract the judge finds it
unambiguous should he or she prohibit parol evidence to explain its meaning.").
The ambiguity of a contract provision is an issue of law, Teton Exploration
Drilling, Inc. v. Bokum Resources Corp., 818 F.2d 1521, 1526 (10th Cir.1987);
Devine v. Ladd Petroleum Corp., 805 F.2d 348, 349 (10th Cir.1986), and we
find no legal error in the district court's conclusion.

40

We are not persuaded by Williams's assertion that the district court erred in this
regard because the pricing provision is merely "silent," not ambiguous, as to the
applicable price upon deregulation. First, the provision is not "silent" as to
deregulation price. Section 3 addresses price in considerable detail, and
subsection (d) explicitly discusses the effects of deregulation. It provides, in
part:

41

(d) In the event the regulation of the price at which natural gas is sold ceases in
whole or in part, or is modified, so as to allow for the sale of gas hereunder at
redetermined prices, then Seller shall have the right to request a redetermination
of the price at which natural gas is to be sold hereunder.

42

R. Vol. I, Tab 21 at Exhibits A, B, C, D, E, F and G.

43

A perfectly reasonable interpretation of this language (which the district court

ultimately adopted) is that nothing happens to the contract price upon
deregulation unless the seller requests redetermination. Otherwise, the seller's
redetermination right would be rendered meaningless. Ambiguity arises
because Williams makes the more attenuated claim that, because this language
does not explicitly state that the deregulation price will be the last regulated
price (if the seller does not request redetermination), it creates an open price
term upon deregulation. Thus, the ambiguity concerns the appropriate inference
to be drawn from 3(d)'s language; two rational, but mutually exclusive, choices
are available. The contract may not be explicit, but it certainly is not silent.

44

Second, to the extent that the pricing provision is not explicit in answering the

44

Second, to the extent that the pricing provision is not explicit in answering the
interpretive question at issue, we cannot find in Colorado law the rigid ban
Williams has described preventing admission of parol evidence to explain this
sort of ambiguity. Instead, the Colorado courts have held that "where ambiguity
exists, parol evidence is admissible to explain or supplement the terms of the
contract." Hott v. Tillotson-Lewis Constr. Co., 682 P.2d 1220, 1223
(Colo.Ct.App.1983) (emphasis added). Indeed, the case Williams cites to
support its proposition fails to do so. In Regents of Univ. of Colo. v. K.D.I.
Precision Products, Inc., 488 F.2d 261, 267 (10th Cir.1973), we held

45 absence from the contract of such language [concerning ownership of the

The
equipment] does not, as KDI asserts, make for ambiguity, but rather the opposite.
******
46
47was the conclusion of the trial court that the contract under consideration being
It
silent, either by apt word or necessary implication, as to the ownership of the
equipment, was clear and unambiguous on its face and conferred no rights to the
laboratory equipment or machines to [KDI]. We agree.
48

Here, however, as discussed above, the contracts arguably contain the sort of
"necessary implication" missing from the contract in that case.

49

In short, we refuse to legally preclude the sort of ambiguity created by

conflicting inferences that can be drawn from incomplete contract language.
Since the pricing provision's language is susceptible of more than one
reasonable interpretation, Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371,
374-75 (Colo.1990), we agree with the district court that it is ambiguous.

50

We therefore affirm, on independent rationales, the district court's decision to

admit extrinsic evidence of the parties' intentions regarding the applicable
contract price upon deregulation.

III.
51

Finally, Williams asserts that the district court's decision "does not comport
with the plain language of the contracts and establishes an illegal contract
price." Brief of Appellant at 37. From the outset, this case has presented two
main issues: 1) whether Williams possesses a right to unilaterally terminate the
contracts, and 2) what the appropriate contract price is upon deregulation of the
natural gas industry. We review each in turn.

Termination

52

The district court, adhering to the two previous summary judgment holdings, R.
Vol. I, Tab 13 at 2-4; R. Vol. I, Tab 25 at 3, held that a necessary precondition
to Williams's right to market out--a Seller request for price redetermination-had not been fulfilled, and held that Williams therefore had no right, under the
contracts, to terminate the agreements. We review this legal conclusion de
novo.
The relevant contract language provides:

53at any time Buyer determines in its sole judgment that it is uneconomical to
If
continue to purchase Seller's gas at the price established in this Paragraph (d), the
Buyer may terminate this Contract upon thirty (30) days written notice to Seller....
54

R. Vol. I, Tab 21 at Exhibits. In clear terms, the termination right only applies
to "the price established in Paragraph [3(d) ]." A new contract price is
"established" under paragraph 3(d) if the seller requests redetermination. No
seller has. The contract precondition to Williams's termination right has not
been satisfied. Moreover, we agree with the district court that Williams's claim
to a broad, unilateral right to market out is inconsistent with Williams's
concession to a seller-only right to redetermination. The seller-only
redetermination right would be meaningless if, whenever a seller chose to retain
the current price by not requesting redetermination, Williams could
nevertheless unilaterally terminate the contract. As a matter of contract
construction, we find no legal error in the district court's analysis. We affirm
the district court's holding that, in the absence of a redetermination, the market
out language does not provide Williams with a right to terminate the contracts
in this case.

Deregulated Price
55

In deciding the issue of applicable price, the district court resorted to extrinsic
evidence of the parties' intent. "If a contract's construction depends upon
extrinsic facts and circumstances, then its terms become questions of fact."
Amoco Production Co. v. Western Slope Gas Co., 754 F.2d at 309; see also
City of Farmington v. Amoco Gas Co., 777 F.2d 554, 560 (10th Cir.1985). We
therefore will only overturn the district court's construction of the contract's
price provision if it is clearly erroneous, i.e., "if our review of the record leaves
us with a definite and firm conviction that a mistake has been made." Amoco
Production Co. v. Western Slope Gas Co., 754 F.2d at 309 (citing Dowell v.
United States, 553 F.2d 1233, 1235 (10th Cir.1977)).

56

The district court found that, in the absence of a seller request for

redetermination, the parties intended the last regulated price to be the contract
price upon deregulation. Overwhelming evidence supported this conclusion.
Indeed, Williams's witnesses uniformly agreed that this was the parties'
intention. R. Vol. IX at 37.10 We cannot say that this finding was clearly
erroneous.
57

Williams argues that the district court's construction of the contracts is

"internally inconsistent."

58
Under
the proper analysis, either the contracts contain no deregulated price--in
which case the contracts fail for lack of mutual assent or the trial court should have
determined a reasonable price under UCC 2-305--or paragraph 3(d) of the
contracts does provide a deregulated price and [Williams] has the right to market out
of the contracts.
59

Brief of Appellant at 38. Williams's argument is based on the premise that any
deregulated price has to be "established" under subparagraph 3(d). Williams
emphasizes paragraph 3's introductory language: "Buyer shall pay Seller ... the
applicable one of the following prices...." According to Williams, the parties
intended the subparagraphs to apply in the alternative. Since (d) is the only
subparagraph that explicitly mentions deregulation, either it establishes the
deregulated price, or there is no deregulated price and the trial court should
have determined a reasonable price under the UCC to fill the open price term.

60

The district court specifically considered and rejected Williams's argument

concerning "the applicable one." In fact, the district court's finding of ambiguity
as to deregulated price was based, in large part, on its attempt meaningfully to
apply the phrase, "the applicable one," in the manner Williams suggests. The
district court could not. Neither can we. The structure and language of the
subparagraphs defy Williams's interpretation. First, at least one subparagraph is
clearly conjunctive.11 Since subparagraph (f) applies to every pricing scheme,
there are, at a minimum, always two "applicable" subparagraphs. Second, the
subparagraphs cross-reference each other. Subparagraph (c) references (d), and
subparagraph (e) references (a), (b), (c) and (d). Thus, by their own terms, the
subparagraphs may "apply" simultaneously.

61

It was this interaction of the subparagraphs that the district court found
particularly confusing. R. Vol. IX at 21. We have already upheld the court's
decision to admit extrinsic evidence on this issue, and, unlike the poorly drafted
contract, the parol evidence was crystal clear: the parties intended the last
regulated price to be the deregulated price unless the seller requested price
redetermination. After reviewing the evidence in its entirety, we cannot say that

this finding by the district court was clearly erroneous.

62

We reject Williams's attenuated argument that the district court's decision

somehow violated federal law by impermissibly basing the contract price for
"tight sands" gas on a provision (3(c)) that did not satisfy FERC's requirement
to "specifically reference[ ] the incentive pricing authority of the Commission
under section 107 of the NGPA." 18 C.F.R. 271.702(a)(1) (1989) (codifying
Order No. 99, 45 Fed.Reg. 56034 (1980), aff'd Pennzoil v. FERC, 671 F.2d 119
(5th Cir.1982)). Williams's argument is premised on its interpretation of "the
applicable one" and its assertion that the district court based its holding solely
on an application of subparagraph 3(c). Williams misses the mark on both
counts. We reject Williams's interpretation of "the applicable one." Moreover,
the district court specifically held, and we agree, that the last regulated contract
price was established pursuant to both subparagraphs (c) and (e). See R. Vol.
IX at 35.

IV.
63

JER and Yuma cross appeal, challenging the district court's award of
prejudgment interest at the statutory rate of eight percent, rather than at a
higher rate which appellants sought. The relevant Colorado statute allows the
court to award interest in "an amount which fully recognizes the gain or benefit
realized by the person withholding such money or property," Colo.Rev.Stat.
5-12-102(1)(a) (Supp.1990), or at a default rate of eight percent, id. at 5-12102(1)(b). In interpreting this provision, we have held that, in order to receive
the higher interest rate, the claimant must specifically prove that the
withholding party actually benefited in a greater amount. Lowell Staats Mining
Co. v. Pioneer Uravan, Inc., 878 F.2d 1259, 1270-71 (10th Cir.1989).

64

The district court found that the evidence did not show Williams "benefited to a
rate greater than 8 per cent by virtue of withholding this money." R. Vol. IX at
43. Upon reviewing the evidence, we cannot say that its finding was clearly
erroneous. See Davis Cattle Co. v. Great Western Sugar Co., 544 F.2d 436, 442
(10th Cir.1976), cert. denied, 429 U.S. 1094, 97 S.Ct. 1109, 51 L.Ed.2d 541
(1977).

65

Accordingly, we AFFIRM in all respects, the holding of the district court.

Honorable Wayne E. Alley, United States District Judge for the Western
District of Oklahoma, sitting by designation

During the period relevant to this litigation, Williams was also known as Cities
Service Gas Company and Northwest Central Pipeline Company. As a result,
the record often refers to Williams under one of these other names. We
uniformly use the appellant's current company name

Two of the 74 wells producing gas involved in the contracts are "stripper
wells," regulated under section 108 of the NGPA, 15 U.S.C. 3318

The gas from the two stripper wells also became deregulated the same day. See
FERC v. Martin Exploration Management Co., 486 U.S. 204, 108 S.Ct. 1765,
100 L.Ed.2d 238 (1988)

Recited is the actual language of the Lockridge contract. Minor differences in

the other contracts are insignificant to this litigation

Williams argues that this discussion refers solely to the defendants' reformation
counterclaim. The evidence admissible to demonstrate reformation, argues
Williams, is significantly different from the general intent evidence that was
admitted at trial, and Williams would have submitted a great deal more
evidence of the parties' intent had it known the legal issue went beyond
reformation
After carefully reviewing the record, we are not convinced that Williams was,
as it claims, holding back any significant evidence of intent. Whatever the
perceived legal rubric, Williams vigorously tried the issue of the parties' intent
regarding contract price upon deregulation. As a result, even if we were to
conclude that the district court had erred, we could not say that Williams was
prejudiced.

In its brief, Williams asserts that the district court specifically stated that it
would not reverse the earlier summary judgment order of Judge Matsch. See
Appellants Brief at 17-18; R. Vol. IX at 10-11. Review of the passage reveals,
however, that the district court was referring to the portion of Judge Matsch's
ruling that dealt with Williams's asserted right to market out of the contracts.
The passage indicates that both Judges Kane and Matsch held that Williams
had not satisfied the precondition for marketing out of the contracts and that the
district court agreed with the earlier holdings. As stated above, the district court
had already informed the parties that it was vacating Judge Matsch's order
regarding the parties' intentions on deregulated price

In opening argument, Williams essentially argued that Judge Matsch's order

had not been vacated. R. Vol. V at 22-23

The court stated:

[T]he presumption under Section 4-2-202 is that the contract is not an

integrated contract because evidence of consistent additional terms can be
admitted unless the Court finds the writing to have been intended also as a
complete and exclusive statement of the terms of the agreement.
R. Vol. IX at 20.
9

Williams asserts that Judge Kane held the contracts were integrated. Scrutiny
of Judge Kane's order reveals that he ruled separately on two distinct issues.
While he did hold that the contracts were "integrated" as to Williams's right to
market out of the agreements, he also explicitly held that "the contract's
construction on the applicable price [at deregulation] depends on extrinsic facts
and circumstances...." R. Vol. I, Tab 13 at 4
Williams similarly cites for support to several documents filed by the
Lockridge Group early in the litigation: a memorandum in support of a motion
to strike, and the affidavit of John P. Lockridge. R. Supp. Vol. I. In the
memorandum, the Lockridge Group argued at length that the contracts were
integrated. In the affidavit, John Lockridge testified:

23

The written agreements were intended to reflect the entirety of the agreement
between Northwest Central [Williams] and the Sellers. For that reason
extensive details were included in the contracts in addition to the major
operative terms such as the pricing provisions, take obligations, quality
specifications, etc
R. Supp. Vol. I, Exhibit A-1 at 6.
Although these documents give us pause, and present a close case, we do not
consider them sufficient to render the district court's ruling on integration
clearly erroneous. First, the apparent admissions are those of only the
Lockridge Group, not JER or Yuma. Moreover, John Lockridge revised his
testimony at trial and stated that the contracts were only the entire written
agreement between the parties. R. Vol. VIII at 676. It is certainly possible that
the district court placed more emphasis on this courtroom testimony. Williams
did not impeach Mr. Lockridge with his prior, apparently inconsistent
statement.

10

Williams's witnesses qualified this testimony with their belief that Williams had
the right to market out of this price. The district court found, however, that this
belief was never communicated to appellees, R. Vol. IX at 37; and, as discussed
above, the district court rejected the existence of any such termination right as a
matter of law

11

Paragraph 3(f) states, in part:

(f) In addition to the other pricing provisions of this Section 3, Buyer agrees to
compensate Seller for production-related costs....
The Lockridge Contract, R. Vol. I, Tab 21 at Exhibit G.